Fintech and banking sector dynamics: Exploring the long-term connectedness between Fintech and themed stock indices across five global markets

Type of the article: Research Article AbstractThis study is motivated by the rise of the Fintech sector and its relevant role in the growth and development of the banking sector. Its purpose is to examine the influence on price formation between indices related to Financial Technology companies (Fintech) and regional stock markets in Europe, emerging markets, Latin America, and the United States. The study uses the Gregory-Hansen test to assess the long-term comovements between the main Fintech-related and regional stock indices. The results indicate that the characteristics of assets as hedging instruments can change over time and in different circumstances. During the pre-conflict period, 26 long-term comovements were identified between the Fintech indices and the regional stock markets, and 31 long-term comovements were identified during the conflict period. The Emerging Markets, Latin America, and Samp;P 500 stock indices were considered full hedging assets but partially lost these characteristics during the Conflict period. In the conflict sub-period, the European regional stock market displayed the characteristics of a hedging asset, as it did not influence the prices of any of the indices analyzed. The study’s implications suggest that assets behave differently in different market conditions, so investors must adapt their asset allocation strategies to manage risk efficiently and build resilient investment portfolios. These findings are also relevant for financial institutions, particularly banks, as they continue to integrate Fintech-driven innovations into their business models and risk management frameworks. AcknowledgmentsThe authors are also pleased to acknowledge the financial support from Instituto Politécnico de Setúbal.nbsp;